part c but if all could be answered, it would be great. thank you.
Portfolio Question Rococo Assume that the current date is 30 November 2018 Rococo ple (Rococo) is a major remotional Operation. At a recent board meeting was decided that the company should diversity by opening som innear to of its hotels at a cost of 1,000 on The following is an extract from the board minutes relating to this diversification The board discussed how the finance would be for this diversos Rococo's current garing mendas debtuity by market value is close to the hotel market average some directors felt that gearing is avant and wanted all the finance to be raised from it. Others were sure and expressed concem that the company's credit rating would fall affecting Rococo's cost oft and the market value of its debentures. They preformed a mox of equity and debtor even all equity Finance The finance director of Rococo was asked to prepare a report on the above stor presentation at the need board meeting An extract from Rocoon's most recent management accounts is shown below Balance sheet at 30 November 2019 Em Ordinary share capital (E1 shares) 190 Retained eating 5.000 5.190 4% Redeemable debertus 1509 On 30 November 2019 Rococo's ordinary shares each had a market value of 0457 div) Rococos debentures are redeemable per (100) in four years time and the current market price of the debentures is offee-int) 93 Total dividends for the years to 30 November 2015 2016 2017 2013 2019 Em Em Em Em Ordinary dividends 105 110 541 Other information and assumptions: The number of Rococos ordinary shares in as not changed in the last five Corporation tax is at the rate of 17% for the foreseeable futur An analyst estimated the following (1) Rococo were to fund the 1,000 mon diversification entry by borrowing the market value of its existing debentures would tell by Rococo were to tund the 1,000 million diversification entirely by equity the market value of its existing debentures would rise by 5% 3 The price of the company's ordinary shares would stay the same whether the project is funded entirely by debt or entirely by equity Requirements la) Calculate on 30 November 2019 Rococo's WACC using the dividend valuation model growth is to be estimated using the earliest and latest dividends) (10 marks) b) Assuming the 1,000 million finance required is raised on December 2019 and taking account of the analyst's estimates, calculate Rococo's gearing (measured obtequity by market values) it comes entirely from debtor equity (4 marks) is Discuss whether the 1,000 million finance required for the diversification should be raised from debt, equity or a combination of debt and equity sources. You should make reference to: relevant capital structure theories Rococo's current gearing your calculations in b) above other devant practical issues (11 marks) . (Total: 25 marks) Portfolio Question Rococo Assume that the current date is 30 November 2018 Rococo ple (Rococo) is a major remotional Operation. At a recent board meeting was decided that the company should diversity by opening som innear to of its hotels at a cost of 1,000 on The following is an extract from the board minutes relating to this diversification The board discussed how the finance would be for this diversos Rococo's current garing mendas debtuity by market value is close to the hotel market average some directors felt that gearing is avant and wanted all the finance to be raised from it. Others were sure and expressed concem that the company's credit rating would fall affecting Rococo's cost oft and the market value of its debentures. They preformed a mox of equity and debtor even all equity Finance The finance director of Rococo was asked to prepare a report on the above stor presentation at the need board meeting An extract from Rocoon's most recent management accounts is shown below Balance sheet at 30 November 2019 Em Ordinary share capital (E1 shares) 190 Retained eating 5.000 5.190 4% Redeemable debertus 1509 On 30 November 2019 Rococo's ordinary shares each had a market value of 0457 div) Rococos debentures are redeemable per (100) in four years time and the current market price of the debentures is offee-int) 93 Total dividends for the years to 30 November 2015 2016 2017 2013 2019 Em Em Em Em Ordinary dividends 105 110 541 Other information and assumptions: The number of Rococos ordinary shares in as not changed in the last five Corporation tax is at the rate of 17% for the foreseeable futur An analyst estimated the following (1) Rococo were to fund the 1,000 mon diversification entry by borrowing the market value of its existing debentures would tell by Rococo were to tund the 1,000 million diversification entirely by equity the market value of its existing debentures would rise by 5% 3 The price of the company's ordinary shares would stay the same whether the project is funded entirely by debt or entirely by equity Requirements la) Calculate on 30 November 2019 Rococo's WACC using the dividend valuation model growth is to be estimated using the earliest and latest dividends) (10 marks) b) Assuming the 1,000 million finance required is raised on December 2019 and taking account of the analyst's estimates, calculate Rococo's gearing (measured obtequity by market values) it comes entirely from debtor equity (4 marks) is Discuss whether the 1,000 million finance required for the diversification should be raised from debt, equity or a combination of debt and equity sources. You should make reference to: relevant capital structure theories Rococo's current gearing your calculations in b) above other devant practical issues (11 marks) . (Total: 25 marks)
